Amazon (Nasdaq: AMZN) stock was on an upward trajectory right up until mid-2020 when share prices leveled out. Shares are trading at around 17% down from their 52-week high of $3,773.08, but even at the current price of $3,130.21, it’s a significant investment. Here’s what you need to know about whether Amazon stock is a good buy right now.
Results for 4th Quarter 2021
Amazon announced its results for the fourth quarter of 2021 on Feb. 3. Revenue grew 9%, to $137.4 billion, which fell just short of estimates from a Refinitiv analyst survey reported by CNBC. However, the company reported $5.80 adjusted earnings per share, which easily beat analysts’ estimates. The positive earnings news drove the stock up in after-hours trading.
Amazon got a significant boost from its $1.3 billion investment in the electric vehicle maker Rivian, which named Amazon its primary cloud provider and has a deal to make 100,000 vehicles for Amazon by 2030, according to CNBC. Rivian went public in November with a $66.5 billion valuation.
Amazon’s full-year revenue was $469.8 billion, a 22% increase from 2020, due in part to 40% annual growth in Amazon Web Services, a positive return on its investment in Rivian and record-setting holiday sales. Amazon CEO Andy Jassy acknowledged in an earnings statement that the retailer had faced higher costs due to labor shortages and inflationary pressures that have spilled over into the first quarter of 2022 but said the company had scaled up staffing and fulfillment to meet those challenges.
Building Wealth
Earnings and Revenue Estimates
Before a company releases its quarterly earnings, the analysts who follow that company, and others in the same industry, estimate what they think the company will report for revenue, earnings per share and other metrics. These estimates are known as “consensus estimates.”
In the fourth quarter of 2021, Amazon’s earnings per share was $5.80, which was well above the consensus estimate of $3.57, as reported by CNBC. This means the company earned more per outstanding share of stock than the analysts thought it would.
Fourth-quarter revenue fared less well. The company was expected to announce revenues of $137.6 billion, but instead, announced $137.4 billion.
Good To Know Amazon Web Services was the fastest-growing segment in the fourth quarter of 2021, followed by advertising services, according to the earnings release. AWS grew 40% compared to the same quarter in 2020, and advertising services grew 32%.
Subscription services grew 15%, sales from physical stores and third-party seller services grew 17% and 11%, respectively. Net sales from online stores were down 1% — not surprising, considering that consumers were shopping in physical stores more often at the end of 2021 than they were at the end of 2020.
Expectations for the 4th Quarter
In its guidance for the first quarter of 2022, Amazon reported that it expects net sales to grow between $112 billion and $117 billion, representing a 3% to 8% increase compared to the same quarter last year. Among the factors that could impact its financial results are uncertainty surrounding the pandemic, inflation, labor and supply chain constraints, changes in consumer demand and spending and changes in global economic conditions.
Is Amazon Stock a Good Buy?
Investors who bought Amazon in the past have done very well, but if the past two years have taught investors anything, it’s that anything can happen, and you may not see it coming.
What the Analysts Say
According to Yahoo Finance, of 47 analysts following Amazon stock as of Feb. 11, 15 rated it a “strong buy,” 28 rated it a “buy,” three rated it a “hold” and one gave it a rating of “underperform.” None of the analysts recommended selling it. This gives Amazon stock an average rating of 1.7 on a scale of 1 (strong buy) to 5 (sell).
The price of the stock at closing on Feb. 11 was $3,065.87. This is lower than any of the analysts’ price targets, which range from a low of $3,333 to a high of $5,000, for an average target price of $4,101.90.
What You Need To Consider
Analysts who follow technology stocks have high expectations for Amazon, and the e-commerce juggernaut still appears to be unstoppable. But investors who are thinking of getting into Amazon stock now need to understand that they won’t see the growth rates the company saw early on, or even in the recent past. If you decide to get in now, it should be to hold the stock for the long term.
Finally, when considering whether to buy Amazon, look at the rest of your portfolio. Tech stocks have been on the rise lately, so they may represent a larger share of your portfolio than you may be comfortable with. Make sure you have a good mix of stocks by market capitalization, sector and growth vs. value orientation.
Comments